ConocoPhillips (US:COP) stocks on the move this morning as the company sales and earnings estimates in its quarterly report. Oil prices are rising, the Houston exploration and production firm is in a stronger position. But it is only in the short term history for COP stock.
Given the cyclical nature of the industry, the CC investors may receive, the problem is more to holding gains than in making a profit.
COP stock blew away estimates
In his report, K1, KS reported earnings per share (EPS) of 96 cents. This exceeded analyst EPS estimates of 29 cents. The COP last year lost 14 cents a share in the same quarter. As profit, revenue also exceeded forecasts. Income made up 8.96 billion, $ 130 million above estimates and grew by 15.7% more than a year ago revenues.
Management of KS have already started to put those profits to good use. The company paid the balance of debt of $2.7 billion. They also raised the dividend by 7.5%. Buybacks also increased by 33%. ConocoPhillips also remains on track to redeem this year shares totaling $ 2 billion.
Despite all this spending, net cash provided by operating activities exceeded capital expenditures, dividends and share buybacks. Its operations, with the exception of Libya now produces 1,224 million barrels of oil equivalent per day. In addition, production in the Continental U.S. increased by 20%.
The company has benefited from increasing demand that has led oil prices above $68 per barrel. COP stock price responded in kind. It now trades at $ 66 per share, close to its high price compared to the recent peak of the oil boom in 2014. That is a small increase from three months ago when I recommended buying COP stock.
Understand the oil business
Investors should remember that the police and peers, such as Anadarko petroleum Corporation (US:APC), the Corporation “Occidental petroleum” (US:OXY), and EOG resources Inc (USA:EOG), the exploration and production (exploration and production) side of the oil business.
Unlike companies Exxon (Ticker NYSE:xom AT) and the Chevron Corporation (Ticker NYSE:cvx on), they do not sell the products at the retail level. This leaves the company in accordance with the extremes of both parties. With rising prices, ConocoPhillips will benefit. However, if there is a downturn, comparable with that in 2014-16 will be presented, revenue slowly trickle, and loss are rising.
For this reason, the owners of KS always need to keep one eye on the exit. I would still recommend to have a position in this stock, since oil prices are trading at moderate levels from a historical point of view. However, given that the stock trades more than 20% above the level on March 19, I would have paid to wait for a pullback to buy.
If oil prices stabiliziruemost at these levels, the COP, the stock is at fair value. If oil prices continue to rise (and I think it will), the profit of the company, and hence the COP of the shares is likely to increase with it.
Holding gains can be harder than earning profit
However, even if the profit increase, holding the growth may be more difficult. To reap long-term benefits to invest in upstream oil means understanding the cycle. If oil prices return to levels 2014, the current investors should seek out and go to other investments.
If the price of oil will reach those heights and then return to low levels in 2016, a buying opportunity for the COP and other reserves oil production may again take shape.
Now as experienced investors, timing is with great difficulty. Investors who sold in good time, you may have to wait years for the stock up to fall and more years to find that low price entry point. However, we know that oil prices have a history of fluctuations high degree. With the perspective and patience to play this cycle will make investors a lot of money in the long run.
The bottom line on the COP stock
COP in action again increases, but investors may find holding gains is more complicated than making a profit from shares of ConocoPhillips. The COP blew away revenue and profit forecasts. It is through these work to position yourself to further increase profit, stabilize its balance sheet and reward shareholders.
I think that this action can profit investors the right entry point. However, stocks of exploration and production of oil behave cyclically. Making and holding a profit in a stock requires investors to understand the cycles of oil prices and the patience to act accordingly. Investors can earn a lot of money playing with the right perspective and discipline.
However, those who lack either the perspective or the patience to invest elsewhere.
At the time of this writing, will Healy not to take a position in any of the above actions.